The World Is Waiting for Powells Signals: Global Economy Week

The Grand Teton mountain range is seen from the Jackson Lake Lodge.

Photographer: David Paul Morris/Bloomberg

Photographer: David Paul Morris/Bloomberg

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All eyes will be on a small resort in Wyoming this week, where Federal Reserve Chairman Jerome Powell will speak for the first time since bond markets hit the recession alarm bells.

His words at the Kansas Fed‘s annual Jackson Hole gathering will be closely watched for clues on what U.S. policy makers will do next. A quarter-point interest rate cut is fully priced in for September, but it’s not clear what it would take to push officials to restart quantitative easing.

U.S. data still point to economic momentum; inflation perked up and retail sales rose in July. The 10-year Treasury yields fell below the 2-year rate for the first time since 2007. The inversion didnt last, but the bond market is making its feelings about the outlook pretty clear.

Powell‘s “speech will be scrutinized for clues as to whether policy makers are reconsidering their course for ’insurance‘ rate cuts to become a full easing cycle,” said Bloomberg Economics’ Yelena Shulyatyeva and Eliza Winger. “Given heightened risks to the economic outlook, any clarification on the conditions that could push the Fed to invoke unconventional measures, such as a full-blown QE, would be crucial.”

Heres our weekly rundown of other key economic events, and click here for more from Bloomberg Economics:

U.S. and Canada

It‘s a Fed frenzy this week. To whet the appetite for Jackson Hole, Wednesday offers the minutes of the FOMC’s July policy meeting, when it cut interest rates for the first time since the financial crisis. Powell described it as a “mid-cycle adjustment,” rather than the start of a major easing cycle.

BlackRocks Russ Koesterich on challenges for central banks and lower bond yields.

Bloomberg

That‘s something that didn’t please Donald Trump, whose ongoing verbal attacks provide the other backdrop to the Wyoming gathering. Among the latest criticisms from the U.S. president: The Fed has been “too slow to cut” and is “clueless.” The title of the Jackson Hole symposium is, aptly, “Challenges for Monetary Policy.”

Canada releases consumer prices data, along with June retail sales and manufacturing numbers before its second-quarter GDP estimate the following week.

• For more, read Bloomberg Economics full Week Ahead for the U.S.

Asia

South Korean exports on Wednesday will offer an early read on the latest on global trade. The figures -- for August -- follow sharp year-on-year declines in both June and July. Global trade worries are also having an effect in Japan, where the yens haven appeal is pushing the currency higher. For the Bank of Japan, thats hampering its efforts to boost inflation. Data Friday are forecast to show price growth stuck at 0.6% in July, the slowest since 2017.

Indonesia will decide on interest rates, with most economists surveyed so far seeing no change in policy.

• For more, read Bloomberg Economics full Week Ahead for Asia

Europe, Middle East and Africa

The European Central Bank jumps into the spotlight on Thursday, when the record of its last meeting is released. That gathering saw no policy change, but Mario Draghi set in train a countdown for September, when a rate cut is expected. QE is also on the table, though just as an option for now.

The ECB record will arrive just hours after the latest euro-zone economic snapshot from the monthly purchasing managers indexes. Germany is in focus after its second-quarter contraction, which has stirred up recession chatter, and manufacturing remains the (very, very) weak link in Europes largest economy.

Israel may announce on Sunday that annual economic growth slowed sharply in the second quarter; the central bank looks set to reverse course later this month on plans to raise interest rates. Egypt, the Middle East‘s fastest-growing economy, will probably join the global easing parade on Thursday, when it’s expected to cut its deposit rate by 100 basis points to 14.75%.

Less Momentum in Israel

Economic growth probably slowed to 1.6% in the second quarter

Source: Israel Central Bureau of Statistics

Zambia could continue bucking the trend and tighten policy to support the kwacha and fight price growth. After a 50 basis-point increase in May, inflation accelerated further in July, leaving it above the central banks target band of 6% to 8% amid the worst drought in nearly four decades.

• For more, read Bloomberg Economics full Week Ahead for EMEA

Latin America

After Mexican policy makers cut interest rates for the first time in five years, investors will focus on Thursdays early-August inflation data to assess whether the easing cycle may continue in September. On the same day, Brazils mid-August price index is expected to come in below target, showing the path for lower rate remain open.

A series of second-quarter GDP numbers are also due from Mexico, Chile and Peru. Mexicos final GDP reading on Friday may be revised down, meaning the country may still be considered in technical recession.

• For more, read Bloomberg Economics full Week Ahead for Latin America

— With assistance by Walter Brandimarte